The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, a summary of today's news; the controversy over pre-9/11 warnings, as seen by editorial page editors in San Francisco, Chicago, Atlanta, and Boston; a report on a debate over advertising in public school classrooms; an update of the criminal trial of the Arthur Andersen accounting firm; and a look at the coming of independence to the nation of East Timor.

NEWS SUMMARY

JIM LEHRER: There were new statements of concern today about potential attacks on America. In a Washington speech, FBI Director Mueller predicted more suicide bombings. He said: "There will be another terrorist attack. We will not be able to stop it. It is something we all live with." Sunday Vice President Cheney said there were intelligence that said al-Qaida would strike again. A Pentagon spokeswoman said the group still had the means to do so.

VICTORIA CLARKE, Pentagon Spokesperson: Any organization that could pull off what they pulled off on September 11, you think about the organization, the planning, and the resources that went into that, clearly they have some organizational capabilities that aren't going to go away overnight. They've made clear their interest intent. Secretary Rumsfeld has talked often. We've had some success in getting some of the leadership. But there are probably a handful of people who easily could run that organization.

JIM LEHRER: We'll have more on this story in a moment. U.S. Immigration officials were guilty of "widespread failure" involving two of the September 11 hijackers. The Justice Department reported that finding today. It focused on why the Immigration and Naturalization Service granted student visas to the hijackers months after the attacks. The investigation blamed a ten- month backlog in paperwork. It did not say the INS should have identified the men as threats in the first place. The U.S. military confirmed today a special forces soldier was killed Sunday in eastern Afghanistan. Sergeant Gene Vance was on a reconnaissance mission when his unit was attacked near a village south of Khost. An allied Afghan soldier was wounded, and an enemy fighter was killed. Vance was a member of the West Virginia National Guard. He had just gotten married last fall when his unit was called up. In the Middle East today, Israeli officials considered how to answer a new spate of suicide bombings. We have a report from Roland Burk of Independent Television News.

ROLAND BURK: The second suicide attack in less than 24 hours came not in a bustling city, but amid the fields of northern Israel. The Israeli army used a robot to inspect the bomber's remains for booby traps. He'd been spotted waiting at a bus stop. When a police patrol approached, he detonated his device, killing only himself. Earlier, another bomber had struck in the close confines of a market in Netanya. More than 50 people were injured, and three were killed. The militant faction the PFLP said it was behind it. Its leader, Ahmed Sadat, is being held under British guard at a jail in Jericho, and the Israelis says lenient security is allowing him to direct a terror campaign from his cell. Israeli Prime Minister Ariel Sharon met his security advisers amid fears of a new wave of bombings after a lull in the violence.

JIM LEHRER: In Beirut, Lebanon, today, a car bomb killed the military commander of a radical group, the popular front for the Liberation of Palestine, general command. His father leads the group, based in Syria. Palestinians charged the Israelis were behind the bombing. Israel denied it. President Bush today ruled out lifting the U.S. trade embargo on Cuba unless Fidel Castro allows sweeping reforms. Last week, former President Carter urged easing the ban during a visit to the island. Mr. Bush addressed the issue today in Washington, and later in Miami.

PRESIDENT GEORGE W. BUSH: Well intentioned, ideas about trade will merely prop up this dictator, enrich his cronies and enhance the totalitarian regime. It will not help the Cuban people. With real reform in Cuba, our countries can begin chipping away at four decades of distrust and division. And the choice rests with Mr. Castro.

JIM LEHRER: And the President spelled out a list of steps the Castro government must take. They included, among others, releasing political prisoners; holding open elections monitored by outside observers; and honoring property rights. He did pledge to ease restrictions on some direct humanitarian assistance to the Cuban people. This was East Timor's first full day of independence. It officially became a nation Sunday, after gaining its freedom from Indonesia in 1999. Today the new government signed a vital oil treaty with Australia, and established full diplomatic relations with the United States. We'll have more on this story later in the program tonight. In U.S. economic news, a key measure of activity dropped in April, for the first time since September. The Conference Board reported today its index of leading economic indicators was down 0.4%. The private research firm said it was evidence the recovery was going "quite slowly." Scientist Stephen Jay Gould died today of cancer at his home in New York. He gained broad public recognition for his writings on evolution, including "Ever Since Darwin" and "The Panda's Thumb." He was 60 years old. And Author Walter Lord died Sunday in New York of Parkinson's Disease. He was best known for "A Night to Remember," his 1955 book about the sinking of the ocean liner "Titanic." He was 84 years old. That's it for the News Summary tonight. Now it's on to editorial opinions on the terror alert story; ads in schools; the Andersen trial; and the birth of a nation.

FOCUS - FIGHTING TERROR

JIM LEHRER: Terence Smith has the terror story.

TERENCE SMITH: FBI Director Robert Mueller became the third senior administration official in less than 24 hours to warn of the ongoing terrorist threat to the nation. Mueller, whose Bureau has borne the brunt of criticism for failing to act on warnings prior to September 11, said that walk- in suicide bombings like those plaguing Israel are "inevitable" in the United States.

SPOKESMAN: Condoleezza Rice on "Face the Nation."

TERENCE SMITH: Yesterday the administration sent two of its most senior voices out on the Sunday talk show circuit to sound further warnings.

VICE PRESIDENT DICK CHENEY: The prospect of another attack against the United States is very, very real. It's just as real, in my opinion, as it was September 12.

ANCHOR: Not a matter of if, but when?

VICE PRESIDENT DICK CHENEY: Not a matter of if, but when.

TERENCE SMITH: The Vice President and National Security Adviser Condoleezza Rice also sought to respond to criticism of the Bush administration's handling of terror-related intelligence reports before September 11-- in particular, one that reached the President while he vacationed in Texas last August.

VICE PRESIDENT DICK CHENEY: It was one more sort of rehash, if you will, of the material that was out there.

CONDOLEEZZA RICE: The fact is with intelligence, unless you have some sense as to when, where, or method, and that it's... it's pretty specific, it's hard to react.

TERENCE SMITH: Senior democrats reacted sharply to the latest information about what was known and when.

REP. RICHARD GEPHARDT: We need to look at who did what, who knew what, and what they did about it.

SEN. JOSEPH LIEBERMAN: We have to ask, "Why didn't somebody put all that together and notify the President, as commander-in- chief, what was going on?"

TERENCE SMITH: Both Congressman Gephardt and Senator Lieberman reiterated bipartisan congressional appeals for an independent commission to investigate the intelligence failures leading up to September 11. The Vice President said he was against it.

VICE PRESIDENT DICK CHENEY: It's very hard for that kind of commission to do what needs to be done in terms of safeguarding the nation's secrets. I think there's a tradeoff here, frankly, between safeguarding that national interest, which is very much at stake here, and satisfying what sometimes becomes a search for headlines on Capitol Hill.

TERENCE SMITH: Meanwhile, a special joint investigation by members of the House and Senate Intelligence Committees is already under way.

TERENCE SMITH: Joining us to discuss this now are four editorial page editors from around the country: Cynthia Tucker of the "Atlanta Constitution Journal"; Bruce Dold of the "Chicago Tribune"; Rachelle Cohen of the "Boston Herald"; and John Diaz of the "San Francisco Chronicle." Welcome to you all.

Cynthia Tucker, we've heard a drumbeat of warnings over the weekend and today from administration figures. What's the effect of that and what's your reaction to it?

CYNTHIA TUCKER: Well, I think it's no great surprise, Terry, that the Bush administration is now sending out some of its highest ranking officials to tell us that it is inevitable that terrorists will strike the U.S. again. It's not surprising, given that they have been under the harshest criticism all last week for not letting us know all they knew and not doing enough to stop the attacks of September 11 now I don't fault President Bush himself for that. At the moment, there is absolutely nothing that we know that suggests the President had enough specific intelligence to know when and where and how the terrorists would strike. But I think there were massive intelligence failures below him. And I hope that our intelligence organizations can do better in the future. On the other hand, I think the U.S.-- Americans will have to become a little more comfortable with living like Israelis do; knowing that an attack could come any minute, but we have to go about our normal everyday business anyway.

TERENCE SMITH: Bruce Dold, what is your view of that -- that both the criticism and the reports as of today, for example with the FBI Director describing another attack as inevitable?

BRUCE DOLD: I think this is what they should be doing and what they should have been doing all along. We have experience with this before September 11. Everyone was told at the time of the millennium there might be terrorist attacks that could come anywhere. People prepared, They made decisions whether they wanted to go out or stay home. They went on with their lives. What we're getting now is there may be some tremors but put the information out. Trust the public to understand that, you know, there is a risk here and let the public gauge it the way it wants to.

TERENCE SMITH: Rachelle Cohen, do you agree with that? Is that the right approach?

RACHELLE COHEN: I think it begins to be the right approach. I mean this whole sort of spate of reports smacks of, you want intelligence reports, we'll give you intelligence reports. This is this the way it is when it comes into our offices. If that's particularly useful to you, terrific. This was the way life is. But on the down side of that, the Administration does run the risk of giving people too much information and therefore crying "wolf". People don't-- won't know what to respond to an. There was an incident shortly after September 11 in Boston about a warning about shopping malls. And of course this caused an enormous amount of dislocation. It turned out to be not terribly reliable. We need to ask ourselves, and certainly the administration needs to ask itself, how many warnings can it put out there before people stop behaving in a responsible manner and stop living their lives by warning and start ignoring them.

TERENCE SMITH: John Diaz, do you think the administration is handling it in the proper way with these warnings?

JOHN DIAZ: Well, I think it makes sense, Terry in that I think most Americans acknowledge there is some sort of t threat out there and I think they want their government to be as credible and as candid as possible. We had a situation also in California shortly after September 11th, where the governor of the state went on television and said that four California bridges were in imminent danger of a terrorist threat. A lot of criticism rained on Gray Davis for that; not because he came out and talked about it, but rather because it turned out that they didn't really give the accurate context for that in talking that it was an uncorroborated information and that the FBI was still checking it out at that point. So I think the American people really now are ready to get that kind of information. I think it's in the Bush administration's interest to get it out.

TERENCE SMITH: Cynthia Tucker, we also of course heard the Democratic responses and criticisms of the administration, its performance and the way it has been handling the information. What did you think of that over the weekend and today?

CYNTHIA TUCKER: Well, I think the Democrats certainly don't want to sound as if they are harshly criticizing the President in a time of war. However, I do think that the calls for an independent outside commission or task force or blue ribbon panel or whatever you want to call it, to investigate this massive intelligence failure, is absolutely necessary because otherwise we will only have partisan wrangling. The Intelligence Committees from the House and Senate should have launched an investigation months back. But they haven't really started, in part because they've been mired in partisan bickering. I think there needs to be an independent investigation of what went wrong. We know that intelligence agencies didn't do as well as they should have, in part because they refused to share information with each other. And if there is not a credible investigation, how in the world will we know how to prevent something this massive in the future?

TERENCE SMITH: Bruce Dold, is that the right move, an independent commission as opposed to a congressional inquiry?

BRUCE DOLD: I don't think anybody is going to believe that an independent commission is independent any more than they believe that Ken Starr was an independent prosecutor. You are talking about starting from scratch to ramp up a group with the intelligence panel that is in place now. You have people who are used to dealing with intelligence materials with very delicate materials. You know, bipartisanship, they'll go after each other, sure, but at least the Democrats and Republicans will be going after each other. They're going to sort of being a check on each other. I think in the end, where we've seen a lot of partisanship in the last couple of days. Nobody is going to be pure on this. If the Democrats want to start criticizing the Bush Administration and FBI, then they're going to have to look back at the Clinton Administration FBI and Ruby Ridge and Robert Hanssen and Richard Jewell and Wen Ho Lee. The Bush team came in and said they were going to clean that up. It is in everyone's interest to show how they are going to learn some lessons from the last year and make the changes they need to make.

TERENCE SMITH: Rachelle Cohen, where do you come down on the question of an independent commission.

RACHELLE COHEN: I was going to say how true, the risk for the Democrats here is enormous. Don't forget this was a President that was in office for a little over nine months, and we do have a former President who ignored all of the warnings out of 1993. I'm inclined to think that the Intelligence Committees could do quite an adequate job if indeed they focus on the job of the intelligence community; what the FBI did or didn't do, what the CIA did or didn't know as opposed to what the White House knew and when it knew it. I think if this devolves into partisan bickering, it is going to come back to haunt the Democrats. I think no one in this nation has the patience for politicizing that kind of thing. And what really is needed here is an examination of the intelligence community and how to make it operate more efficiently in the future. It's time to-- we need to look perhaps a little bit at the past but that's not nearly as important as making this a good working tool of this administration.

TERENCE SMITH: John Diaz, would you find a congressional inquiry persuasive and credible, or should it be independent?

JOHN DIAZ: No, here's why it needs to be independent, Terry, is the Congress may as well be part of the problem here and is really not in a position to independently investigate this intelligence breakdown. Look, I have not been terribly critical of the Bush Administration for what, at this point, appears to be the sketchy details that it knew before September 11. But I think we do need to be critical of the Bush Administration for taking eight months to disclose that it did have some of this information before September 11, because remember, one of the big questions, legitimate questions after the terrorist attack was how could this enormous intelligence system that we have that we spend billions of dollars a year on fail as it did? Remember, since September 11, we've had-- Americans have been asked to give up a lot of civil liberties because our Attorney General has said that they did not have the tools to track terrorists. Well, it turns out they did have the tools. They had an FBI agent in Phoenix who was doing his job, who sent that information to headquarters. And the problem was not that law enforcement didn't have the tools. The problem was that you had two agencies that were very secretive, very turf conscious that weren't talking with each other.

TERENCE SMITH: Cynthia Tucker, we've heard both Vice President Cheney and Condoleezza Rice say the system is better now. There are protections in place, there's better coordination from among the different agencies. Are you persuaded?

CYNTHIA TUCKER: Absolutely not. And let me just say, I certainly hope the system is better now than it was. The system was enormously derelict prior to September 11, but Ms. Rice and President Bush no doubt thought prior to September 11 that the system was working just fine then. So I don't think we should rest on their assurances that it's fine now. I think we need to know much more than we know. Let me also respond to something my colleague from the "Boston Herald" said earlier. I think her remarks about Clinton's alleged failures are one more reason why we need an independent commission. The simple fact of the matter is that President Clinton did respond in a limited fashion to the threat of terror. He launched attacks on Afghanistan, launched attacks on the Sudan. But prior to September 11, nobody took the threat as seriously as it needed to be taken. And until there is an independent investigation and that group makes its findings public, I think we have to worry about whether the system is as good as it ought to be.

TERENCE SMITH: Rachelle Cohen?

RACHELLE COHEN: I was just going to say I think that was an aspirin factory we ended up bombing in Afghanistan. To say that we actually responded in Afghanistan would be a gross overstatement of the facts of the matter. But what I do agree with Cynthia on is the fact that, well, Cynthia and John both raise the question of the role of Congress and Congress has fallen down on the job certainly in supporting the intelligence committee. One name one of us-- none of us have mentioned here tonight, which probably bespeaks his position in all this, is Tom Ridge. Poor Tom Ridge is just-- has a job without portfolio, it would appear. He hasn't been on any of the Sunday morning talk shows. So I think if we are going to have a terrorism tsar, perhaps it's time he were given some powers.

TERENCE SMITH: All right. I'm afraid we have to leave it there, but thank you all four of you very much.

JIM LEHRER: Still to come on the NewsHour tonight, ads in school; the Andersen trial; and freedom for East Timor.

FOCUS - ADS IN SCHOOLS

JIM LEHRER: Commercials in public schools: Lee Hochberg of Oregon Public Broadcasting reports.

SPOKESPERSON: Last week in Afghanistan...

LEE HOCHBERG: Reporter: The school day at Seattle's Hamilton intermediate school began with the news from Channel One.

SPOKESPERSON: There are millions and millions of landmines that have yet to be exploded all over the countryside. (Explosions)

LEE HOCHBERG: The ten-minute youth newscast is sort of a hybrid of a weekly reader and MTV. The Primedia Company provides it free of charge to 40% of the nation's schools, so long as the schools show two minutes of commercials.

SPOKESPERSON: New AOL Version 7.0.

SPOKESPERSON: You've got mail.

LEE HOCHBERG: On the day we visited, students told us they had learned from the program.

STUDENT: It's unfair to Afghanistan because all the people from there are getting attacked and sitting on mines.

LEE HOCHBERG: And theydefinitely remembered the commercials.

STUDENT: AOL 7.0.

LEE HOCHBERG: It's those commercials that induced the Seattle school board recently to begin phasing Channel One out of its schools. Board member Michael Preston said Channel One isn't about educating.

MICHAEL PRESTON: It's a way to deliver advertising. That's what Channel One is all about. It was not done for benevolent reason, to deliver news to kids. It was done to deliver advertisements to kids.

LEE HOCHBERG: Channel One says the commercials pay for the program, a program that for many kids is the only news they see all day. Primedia's Jeff Ballabon:

JEFF BALLABON, Channel One: Teenagers are exposed to thousands of commercial messages a day. They wear them on their bodies. They read them; they see them; they eat them every day. It is difficult to imagine that there's some net impact of materializing teenagers because of two additional ads a day.

LEE HOCHBERG: Still, in Seattle and several cities nationwide, it's being unplugged from classrooms. And in New York State, it has never even been allowed in-- all part of a broad reconsideration of commercialism's place in public schools. Five years ago, Seattle public schools were some of the first to embrace advertising and private partnerships as new sources of revenue. But critics say in hindsight, that policy was wrong.

MICHAEL PRESTON: What went wrong with it was everything. What ended up showing up on our doorstep was all of the soft drink companies, coffee companies, junk food companies.

SPENCER MICHELS: Preston says the district hoped selling ads would ease budget woes and fund some student activities. But what it really did was expose students to products that he says are unhealthy.

MICHAEL PRESTON: They should not be subjected to spending a part of their day being pandered to by some company that wants you to consume something that's not good for you.

LEE HOCHBERG: So pervasive did advertising become in Seattle schools that today, posters promoting reading also promote Airborne Express and Starbucks Coffee. School menus don't include just cookies and juice, but Otis Spunkmeyer cookies and Nantucket Nectars. At Nathan Hale High School, a teacher brought us a packet of hygiene products their manufacturer wanted distributed to students.

TEACHER: As you can see, there is a free sample of Clearasil stay- clear lotion, a deodorant, roll-on deodorant, and then we have some shaving cream, compliments of whoever owns Edge.

LEE HOCHBERG: And a teacher down the hall was busy covering textbooks with corporate- supplied covers. In a silent protest, she wrapped them backside-out, so the logos of Nintendo, Gatorade, and Secret deodorant didn't show.

MICHAEL PRESTON: Ultimately and eventually, the schools will start to look like big ads, and I don't think that's where we should go.

LEE HOCHBERG: While ads like these will remain, Preston's last action before retiring in December was to push through a new anti-commercialism policy that's just now going into effect. In addition to phasing out Channel One, it discourages advertising on school buses and eliminates advertising on school scoreboards and buildings. And it tones down advertisements on vending machine facades.

MICHAEL PRESTON: This is the way that they all used to look. And it doesn't say "Drink Coca-Cola," but there is a subliminal message there. It's cold; it's frosty; it's refreshing. The machines that have this display on them sell more product.

LEE HOCHBERG: He wanted a faceplate that simply said "soft drinks." But Coca-Cola in 1998 had signed a five-year $5.8 million contract with the district to be its exclusive soda provider, and the company wanted its logo on the machine. Sean McBride is with the National Soft Drink Association.

SEAN McBRIDE: I think it helps people know that that product is available in the machine, and that's where they go to get the product. I think it is a matter for reasonable people to judge whether or not that constitutes advertising. And I suspect that most people would agree that that's not.

LEE HOCHBERG: The two parties settled on this facade, which shows a smaller Coke logo. Parent groups were disturbed. Rita Butler-Wall of the Citizens Campaign for Commercial-Free Schools, says advertisers shouldn't drive school policy.

RITA BUTLER-WALL: If they want to provide money, they should be paying their share of taxes, and then people who we elect will decide how to spend that money. We will not have these so-called corporate sponsorships that are nothing but a Trojan horse bringing something, supposedly a free lunch into the building, which is really just a way of getting at small children.

LEE HOCHBERG: Research suggests that advertising does indeed affect children. A Michigan State University Study of 800 high school students found Channel One viewers expressed greater intent to buy the product advertised on the program than non-viewers did. And in an "Advertising Age" study of 12,000 youngsters on a youth-oriented web site, more than one-third of the teens said they often tell their parents to buy things they see advertised.

TEACHER: Has that impacted you? Have you even noticed that they've changed that?

LEE HOCHBERG: Yet at Nathan Hale High, students debating the issue on a recent school dress- up day said ads don't affect them.

MELANIE WELCH, Student: Like, you have to decide what you want more, and I would prefer having sports teams and extracurricular activities over not having them if we have to see, like, Coke ads in schools. I think it's definitely worth it.

JO LANDIS, Student: We've already been bombarded our entire lives with coke ads. Seeing just one more in high school, by the time we're all between, like, 15 and 18, does not make a difference.

LEE HOCHBERG: School administrators say corporate support is essential to big-city schools right now. Indeed, Seattle's new policy bans corporate logos, but allows them in the case of so-called corporate sponsorships: Special programs that wouldn't exist without corporate funding. Seattle School Superintendent Joseph Wolchefske:

JOSEPH WOLCHEFSKE: I would not be supportive of any policy that substantially restricts business involvement in our schools, because we fight for business support and involvement in our schools. I don't think we can live without business support.

LEE HOCHBERG: Wolchefske says the district's Biotechnology Academy, sponsored by the Immunex Company, teaches material schools can't teach on their own. And in this program with Washington Mutual Bank, bank employees come to schools and help kids set up Washington Mutual savings accounts. Students get prizes if they make deposits. The district says kids learn to save money, but it's clear they learn brand loyalty, too. Do you guy have a favorite bank?

STUDENT: Probably Washington mutual.

STUDENT: Washington Mutual, because I've been saving money with them for a while now.

LEE HOCHBERG: Wolchefske says there is no way around that.

JOSEPH WOLCHEFSKE: I think those that argue that we've got to create a kind of hermetically sealed environment, I don't think we can get there at a practical level.

LEE HOCHBERG: Nonetheless, other school boards in Washington State and in Michigan are considering anti-commercialism policies of their own. Anti-commercialism groups say the next target is so-called sponsored educational materials used in the classroom, like this one, sent to Seattle teachers by the Chocolate Manufacturers Association. It encourages students to collect candy wrappers as a school project; and this package from Godfather's Pizza, which uses its pizza to teach math skills, and rewards students who master them with the product itself.

UPDATE - CALLED TO ACCOUNT

JIM LEHRER: Now, Arthur Anderson on trial: Gwen Ifill has that.

GWEN IFILL: The government's case against Arthur Andersen entered its third week today in federal court in Houston. The accounting firm is charged with destroying records involving audits of the Enron Corporation in order to keep them out of the hands of federal regulators. Central to the government's case is David Duncan, a former Andersen auditor who, in a deal with prosecutors, has admitted to destroying documents. Duncan spent four days last week on the witness stand. For an update on the trial, we're joined by Kurt Eichenwald, a reporter for the "New York Times"; and Ira Sorkin, a former regional administrator for the Securities and Exchange Commission, and now a lawyer with Carter, Ledyard, and Milburn in New York. Kurt Eichenwald, you have been sitting in this courtroom every day keeping track of this trial. So was David Duncan the smoking gun, the star witness he was purported to be?

KURT EICHENWALD, The New York Times: Not really. What has been interesting about this trial so far is that if you stacked up all the documents the government proved were destroyed, it wouldn't get up to your knee. They're building their case. Even at this point, they're talking a lot about motive and about how the desire to hide information was being created, but haven't told a lot about why it was done. Duncan was actually a very problematic witness because in the cross-examination, he had such issues as when Andersen's lawyer asked, "What information did you want to keep from the SEC?"-- kind of a basic question -- he wasn't able to give an answer... at least, not one that seemed particularly credible. So all in all, Duncan was somewhat of a wash.

GWEN IFILL: Ira Sorkin, do you think also that Duncan was a wash? Did he do what they set out for him to do?

IRA SORKIN, Former Director, New York Office, Securities & Exchange Commission: I think you have to look at a case that the government presents as a mosaic. Duncan was one piece of the case. I think you need to understand that government cannot put all of its evidence on through one witness. They're going to build on their case. I heard what Kurt has to say. Quite frankly, it's not the number of documents that are destroyed. It's the fact that documents were destroyed, and it is up to the government to decide what is relevant or not relevant. That's not Andersen's call. I think it is also important to understand that Duncan is a witness here, who played only a role. And as I understand what happened today, Nancy Temple, who has asserted the Fifth Amendment, as well as another Andersen employee, also indicated through documents that the government introduced that there was some correlation between what took place in Houston and what took place in Chicago through the Council's office.

GWEN IFILL: Let me ask Kurt to describe those documents for us since he was in the courtroom today.

KURT EICHENWALD: Well, actually the documents today were probably some of the more significant things that have been introduced. During the fall, this lawyer from Chicago, Nancy Temple, who worked with Andersen, was taking notes of her conversations with a group of Andersen managers including David Duncan. And today what was introduced was, in particular, one document that made references to possible SEC investigations related to Enron, also concerns about an earlier case involving Andersen called the Waste Management case, which had resulted in an injunction against Andersen. And the government's case is essentially that the Waste Management case is the motive for what led to the document destruction in this instance. And this so far was the strongest piece of evidence supporting that contention.

GWEN IFILL: Mr. Sorkin, isn't Nancy Temple the same executive who is accused or was supposed to have authored this document retention memo suggesting that perhaps it might be a good idea, or at least open to interpretation that it was a good idea, to destroy these Enron documents? And has she... is she going to be testifying in this trial?

IRA SORKIN: It is my understanding that she has asserted the Fifth Amendment privilege, unlike what she did before Congress. But I think you also need to know, or at least understand, is that when the government is introducing this case, they need to show that there is a motive here. That was a very tough call for the defense. The motive here is quite simply if Andersen got hit again about it SEC in another case, even a civil case, not a criminal proceeding, the impact could have been draconian on Andersen's ability to continue as a viable accounting firm. Their license would have been susceptible, their ability to practice before the SEC, There clearly was a very strong motive not to get hit again by the civil regulators.

GWEN IFILL: Kurt Eichenwald, let's go back for a moment to the case with David Duncan. It seems the government was trying to prove, prosecutors were trying to prove, that he had some sort of criminal activity. In fact, he has admitted in his plea deal to some criminal activity. But that the government was trying to prove the opposite? Is that the way it worked?

KURT EICHENWALD: It is sort of an interesting scenario because the government essentially is saying this man is a criminal, and Andersen is saying, "No, he's not," which, given that he is the chief witness against Andersen, it is interesting. The government's contention is very simple: Duncan knew that the SEC was coming; he knew that there was an investigation, and in response, he orchestrated a massive destruction of records in the fall of last year. That is, you know, pure and simple, an obstruction of justice. Andersen's response to that is, while there was a destruction of records-- no one disputes that-- the motive for that destruction had nothing to do with the impending SEC investigation. It was an attempt to get the records completed, to put them in final form. There were also some intimations last week that they were... that it was because the Andersen partners from Chicago were coming down to take a look at how the folks in Houston had done putting their records together.

GWEN IFILL: In fact under cross-examination, Duncan apparently couldn't recall what the memos were that he is supposed to have destroyed.

KURT EICHENWALD: No. No. He was able to recall them. What he described were copies of records, old financial, publicly filed financial reports, early drafts of memos. Basically he had described a little bit of, you know, innocuous material. I forget the word he used, but it was something like that. Now the thing is, that was the one- inch thick stack he handed to his Secretary. There are thousands and thousands of other documents that were destroyed by the people who worked for him-- boxes upon boxes. We don't know anything about what was in there, what went into the decisions of how to destroy those, why to destroy those. Presumably that's what the government's case is going to be presenting over the next few days.

GWEN IFILL: I was going to ask Mr. Sorkin about that. What do you think is the government's strategy and what do you think the prosecution's strategy in the case at this point?

IRA SORKIN: It is clear from today that the government is tying a link to Chicago. There was evidence that was introduced, as Kurt told you, about memos that reflected the fact that Andersen, at least through senior people, knew there was an SEC or the potential, I should say, for an SEC investigation. It was also the potential that Enron had problems-- the off-balance-sheet bookkeeping. So at least what the government is doing up to this point-- and I said building this mosaic-- the government is attempting to show that there were others in this organization, in senior management, who knew of the possibility that an SEC investigation leading to Enron could have a serious impact. And therefore, they implemented what they called document destruction/retention policy and notified Houston that the policy ought to be implemented. So I think again, the mosaic is falling into place. Whether it will have an impact on this jury, no one can tell until there is a verdict.

GWEN IFILL: Kurt, there seems to have been some friction in the courtroom between the judge and the Andersen attorney, Rusty Hardin. What was the source of that?

KURT EICHENWALD: Calling that friction is like calling the Chicago fire a small blaze. Mr. Hardin is quite the showman. He has made it very clear that he believes this prosecution is improper, is wrong, and he has done everything he can to let the jury know that-- to let the jury know that through his questioning, to let the jury know that by objecting to the judge's refusals to allow him to ask certain questions. And the judge has gotten very angry about it. And she had a bit of a blow-up with Mr. Hardin on Thursday where she called certain things he was trying to do underhanded. He responded, you know, "Go ahead, keep the truth from the jury." The next day, in front of the jury, the judge called a bench conference and he responded, you know, "Oh, please, let's not have one. Nothing good ever comes of those." It's the kind of behavior I haven't seen very often, in a criminal case. But in a way, I think Mr. Hardin is trying to convey to the jury this impression that Andersen is up against a Goliath, that it's the government versus Arthur Andersen. I have no idea if that's effective or not.

GWEN IFILL: Well, we'll be watching to see. Kurt Eichenwald and Ira Sorkin, thank you very much for joining us. Orkin, thank you very much for joining us.

FOCUS - INDEPENDENCE DAY

JIM LEHRER: Finally tonight, a new nation is born. Ray Suarez has the story.

RAY SUAREZ: A midnight fireworks display heralded East Timor as the world's newest nation today. The festive ceremony stood in contrast to these images of devastation broadcast from East Timor three-and-a-half years ago. The tiny half-island territory in South Asia had been occupied by Indonesia since 1975, when Portugal gave up its 460-year colonial rule. In August, 1999, after years of bloody conflict, the Indonesians, under pressure from the world community, allowed the East Timorese to decide their political future. 80% voted in favor of independence in a UN-sponsored referendum. But local Timorese militia forces believed to be allied with the Indonesian army opposed independence. (Gunfire) Within days of the vote, they took to the streets, killing nearly a thousand and wounding many more. Most of East Timor's buildings were destroyed, as were water, power, and communications facilities. Three-quarters of the 800,000 East Timorese were displaced from their homes during the fighting. Many fled to the other half of the island, still held by Indonesia. The violence ended in October, 1999, after Indonesia, under foreign pressure, withdrew its army, which deprived the militia of support. Indonesia agreed to allow international peacekeepers from Australia and elsewhere to police East Timor and enforce a cease-fire. The Australian-led force was succeeded by a 15-nation UN force. That group ran East Timor's transition to self-rule. Representatives of the countries that helped shepherd East Timor to independence were prominent at today's celebrations. President Bush sent former President Bill Clinton. Australia's Prime Minister John Howard was there. Even Indonesian President Megawati Sukarnoputri, a longtime opponent of independence, made a point of coming to East Timor for the ceremony. UN Secretary General Kofi Annan handed over sovereignty to East Timor's newly elected President Jose "Xanana" Gusmao.

KOFI ANNAN: As Secretary General of the United Nations, I have the honor to transfer executive authority the united transitional administration to the institutions of the Democratic Republic of East Timor.

RAY SUAREZ: In his inaugural speech, the resistance fighter and political prisoner-turned- president said plenty remains to be done.

JOSE GUSAMAO, President, East Timor: After our political independence, our supreme objective will be the comprehensive development of all aspects of the lives of our people, from the cultural to the scientific; from the social to the economic. Our history will continue to be made by our people for the dignity of the human being, in the tolerance among groups and the respects among communities. In the collective, dynamic participation of society, this will be our new philosophy as citizens, our new culture as a country, and our policy as East Timorese. To the international solidarity, we extend a profound word of thanks from our people.

RAY SUAREZ: The people of East Timor celebrated all day. A triumphant military parade was held in the capital, Dili, and East Timor's prime minister swore in his government in a ceremony outside its new headquarters. And at the new U.S. Embassy, former President Clinton watched as the stars and stripes was raised.

RAY SUAREZ: For more on East Timor, its independence and future, we turn to Jean-Marie Guehenno, United Nations Under Secretary General for Peacekeeping; and Dwight King, professor of political science at Northern Illinois University. He's worked as a senior adviser and election monitor in East Timor for the Carter Center.

Professor King, as we look at the balance sheet as East Timor begins its first week as a country, what are the assets and liabilities that the Timorese have to work with as they build a country?

DWIGHT KING: In terms of assets, clearly they have a great desire and a will to form a nation. They have waited so long -- first through Portuguese colonialism, then the Indonesian invasion and occupation. So I think the will of the people, perhaps, is their strongest asset. Another major asset, of course, is the attitude of their new President, Mr. Gusmao, who has been a very, very firm advocate of reconciliation, of looking ahead to the future. In terms of liabilities, I guess the first thing that comes to mind is how to maintain fiscal policies in the midst of such dire economic and social needs. That's going to be a major problem because this is a very poor country. Estimated 55% of East Timorese are below the poverty line. The life expectancy is only 55 years; unemployment is very high. Only perhaps 37% of the adults over age 15 and outside the capital city are literate. And for the time being, economic resources are probably adequate in the sense that the assistance being put together by the UN, by the donor countries, amounting to about $360 million over the next three years is going to do a lot. But beyond that, the problem of resources, I think, looms very large.

RAY SUAREZ: Mr. Undersecretary, given what the Professor just said, and given your experience in helping usher East Timor to this day, what are its prospects for viability as a healthy, independent country?

JEAN-MARIE GUEHENNO: Well, I think as was just said, the greatest resource of the East Timorese is their will. They have also some luck in the sense of their East Timor, the Timor gap - that is the expanse of sea between Timor and Australia - their oil and gas resources - and we hope that within three or four years these oil and gas resources will begin to bring a steady flow of money to East Timor. But I think what's needed at this stage is jobs, a lot of jobs. As was mentioned, there is still quite a bit of unemployment in East Timor, and we've got to get the economy running and foreign investment coming to East Timor. We've got to get the attention of the international community focused, continuing to focus on East Timor.

RAY SUAREZ: And Mr. Undersecretary, maybe you could explain a little bit about the unusual status that East Timor enjoyed in the last two years -- United Nations receivership, a very unusual kind of process. Tell us more.

JEAN-MARIE GUEHENNO: Well, in September of 1999, after the vote showed that the East Timorese had opted for independence, there had to be a solution, because they couldn't be independent overnight. And that's how the international community came to the conclusion that East Timor would be run for a temporary period, for a transitional period, by the United Nations. That was something quite unprecedented. That meant that the United Nations and the peacekeeping force would not just provide the security, but would provide an administration, judges, tax experts, all that is necessary to run a country. And that's what we have been doing in the past two years and a half.

RAY SUAREZ: And Professor King, you thought it went pretty quickly on the whole, that process from really the devastation that we saw in the beginning to what's there today?

DWIGHT KING: It went quickly in that the United Nations very well orchestrated first the popular consultation that gave the direction for the political development to move toward independence, then the elections for the constituent assembly and finally just last week, the presidential election. So in that sense, in terms of the very well administered political development by the UN, developments have progressed rapidly. I think in this last election, there has been much more ownership over the process by the East Timorese. But clearly there is tough sailing ahead; for example, I think friction has opened up between Mr. Gusmao, President Gusmao, the prime minister, Mr. Maury Ocutori, and that tension is probably good in terms of checks and balances but it also means that Timorese elite are going to have to work together very closely if they're going to make progress.

RAY SUAREZ: Professor, Megawati Sukarnoputri's presence at the independence ceremonies, if there was still heavy conflict inside Indonesia over this transition to independence, why the President? Why not some lower ranking official who would at least show the Indonesian flag and then go home when this was all over?

DWIGHT KING: Well, indeed, Mr. Gusmao made a special trip to Jakarta to personally invite President Megawati to the festivities. The Speaker of the House and the Indonesian Assembly took the position that with so many unresolved issues and, above all with the psychological problems that exist over this relationship, that that was too high a profile and that it was quite enough to send the foreign minister. Eventually, the Indonesian army indicated their support for President Megawati to go to East Timor. Once that came through, then it was very clear that she would go, but I think certainly it was the right decision. Indonesia is-- surrounds East Timor. They have to be able to work together. Indonesia has a lot to offer East Timor. Timorese leadership, as I said earlier, wants to look forward. So having President Megawati there, despite a lot of disagreement in Indonesia, was the right decision.

RAY SUAREZ: Mr. Undersecretary, how long are we talking about for a transitional period? The Timorese are in charge. They have a flag. They have an anthem, a government. But the UN is still very much involved, isn't it?

JEAN-MARIE GUEHENNO: Yes, because it's still a very poor country, which needs to be-- to consolidate itself. So the Timorese have asked the international government to stay engaged. There is a provision of security. The Timorese are building a defense force. It will be a small defense force. But at the moment they only have 600 soldiers. They will have a little more than that, about 1,500. So we still keep a peacekeeping force in East Timor. And then on the government side of East Timor, there are few critical functions where they do still need the support of the international community. So I think we are talking about probably two years to close the mission. And then that doesn't mean that the involvement of the international community will cease. I think there will continue to be a need for development assistance, for support for East Timor.

RAY SUAREZ: And has the United Nations learned some lessons in this project that might make this something you could do with other nations in trouble, this UN receivership?

JEAN-MARIE GUEHENNO: Well, receivership is a strong word. What we have seen is there are a number of situations where nation states need international support and that supporting them is part of the peace building process. I think what we are learning from East Timor is a lesson of humility and at the same time of adequate resources -- humility in the sense that when you help a nation build itself, you have to make sure that it owns the process -- that you are supporting it, you are not substituting for the people who have to build their nation. At the same time, it's also a lesson of putting the adequate resources. Too often we have done-- we have tried to do too much with too little. And I think in the case of East Timor, we have been successful because the international community mobilized the right resources. It made a major effort in the past two and a half years. And that's why we have a success now.

RAY SUAREZ: Undersecretary, Professor, thank you both.

RECAP

JIM LEHRER: Again, the major developments of this day: There were new statements of concern about potential attacks on America. FBI Director Mueller predicted suicide bombings, and President Bush ruled out lifting the U.S. trade embargo on Cuba unless Fidel Castro allows sweeping reforms. We'll see you online and again here tomorrow evening. I'm Jim Lehrer. Thank you, and good night.